ARE TAYLOR RULES VALID IN CENTRAL EASTERN EUROPEAN COUNTRIES?

• Authors: Wang Yi , Chun Jiang , Hsu-Ling Chang , Ch-Wei Su
• Languages of publication: EN

Abstracts

EN

This study applies a stationary test with the flexible Fourier function proposed by Enders and Lee (2012) to test the validity of Taylor rules to assess the non-stationary properties of the convergence of the real exchange rates for ten Central Eastern European countries. We find that our approximation has a higher power to detect U-shaped breaks and smooth breaks than the linear method if the true data-generating process of exchange rate convergence is in fact a stationary non-linear process. We examine the validity of Taylor rules from the non-linear point of view and provide robust evidence that Taylor rules holds true for seven Central Eastern European countries. These results imply that the choices and effectiveness of the monetary policies in Central Eastern European economies are highly influenced by Taylor rule and also influenced by external factors originating from the United States.

Keywords

EN

TAYLOR RULE; FOURIER STATIONARY TEST; STRUCTURAL CHANGE; TREND BREAKS; CENTRAL EASTERN EUROPE

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2015
• Volume: 63
• Issue: 7
• Pages: 665- 685

Contributors

author

Wang Yi

• Wuhan University, Department of Finance, No. 299, Bayi Rd., Wuhan, China

author

Chun Jiang

author

Hsu-Ling Chang

author

Ch-Wei Su